The European football governing body UEFA on Thursday approved new licensing regulations to replace its existing Financial Fair Play (FFP) rules.
The new rules will allow European clubs to make bigger losses than before but limit spending on wages and transfers.
As expected, European football's governing body decided to overhaul the FFP rules that were introduced in 2010 in order to reduce spiraling debts among clubs across the continent.
FFP's limitations had been exposed by the emergence of state-held superpowers like Manchester City and Paris Saint-Germain.
"The biggest innovation will be the introduction of a squad cost rule to bring better cost control in relation to player wages and transfer costs," UEFA president Aleksander Ceferin announced at a press conference in Nyon, Switzerland following a meeting of the body's executive committee.
UEFA will now allow clubs to report losses of 60 million euros ($65.5 million) over three years rather than 30 million euros previously and the permitted figure will even reach 90 million euros for a club "in good financial health."
However, that relaxation of the rules is combined with the new ceilings on wage spending.
There was never any possibility of bringing in a specific salary cap like those used in North American sports because UEFA has 55 member countries with well over 1,000 clubs and must contend with European Union and national labor and competition laws.
Yet under UEFA's new regulations clubs will be forced to limit spending on player and staff wages, transfers and agents fees to 70% of total revenues by the 2025-26 season.
The ceiling will drop as current contracts expire: 90% of club income in 2023/24, followed by 80% the season after and then to 70%.
"Breaches will result in predefined financial penalties and sporting measures," said Ceferin.
Clubs who break the rules could be hit with transfer bans, loan restrictions, demotions from one European competition to another and points deductions in the Champions League.
